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    Calculating elasticity for each of the given variables

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    The following questions refer to this regression equation. (Standard errors in parentheses.)
    QD = 15,000 - 10 P + 1500 A + 4 PX + 2 I, (5,234) (2.29) (525) (1.75) (1.5)
    R2 = 0.65
    N = 120
    F = 35.25
    Standard error of Y estimate = 565
    Q = Quantity demanded
    P = Price = 7,000
    A = Advertising expense, in thousands = 54
    PX = price of competitor's product = 8,000
    I = average monthly income = 4,000

    Calculate the elasticity for each variable and briefly comment on what information this gives you in each case.

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    https://brainmass.com/economics/elasticity/calculating-elasticity-for-each-of-the-given-variables-382783

    Solution Preview

    QD =15000-10P+1500A+4PX+2I

    Put
    P 7,000
    A =54
    PX = 8,000
    I = 4,000

    QD=15000-10*7000+1500*54+4*8000+2*4000=66000

    Calculating Own price elasticity of demand
    QD =15000-10P+1500A+4PX+2I
    dQD/dP=-10
    Own Price=P=$7000
    QD=66000 (as calculated above)
    Own price elasticity of demand =(dQD/dP)*(P/Q)=-10*(7000/66000)= -1.06

    For 1% increase in price quantity demanded will decrease by 1.06%. For 1% decrease in price, quantity demanded will increase by ...

    Solution Summary

    Solution describes the steps to calculate elasticity for each of the given variables.

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